National Century under scrutiny; reserves reported depleted

Thursday

Jan 31, 2008 at 12:01 AMMar 17, 2008 at 4:20 PM

A Dublin-based company that lends money to the health-care industry is meeting with financial backers to sort out its finances.

Officials from National Century Financial Enterprises, which has 230 employees at its Memorial Drive headquarters, met yesterday with holders of the bonds it issues to pay for its business, spokesman Jim Nickell said.

The talks were aimed at finding out why reserve funds of bond-sale proceeds were largely depleted by NCFE, apparently without the knowledge of bond trustees J.P. Morgan Chase and Banc One Corporate Trust Services, or ratings agencies Moody's and Fitch.

"There's no question we are working very hard to stabilize the company," Nickell said. "It's too soon to determine the outcome."

NCFE is the nation's largest purchaser of hospital, physician and other health-care receivables. It serves as a middleman between insurance companies and health-care providers around the country, including 60 hospitals, nursing homes and others.

To avoid waiting months to be paid, those health-care providers sell receivables for 97 cents on the dollar to NCFE. NCFE then collects payment from the patients' insurance carriers, Medicare or Medicaid.

Hospitals and health-care providers have been stepping forward to complain about NCFE.

Pain Control Consultants, a Grandview Heights-based pain center with 27 employees, says it hasn't been paid by the company for the past two weeks and is owed $700,000. NCFE pays out $30 million per week to its provider clients.

"When someone is getting deposits of your money and you are not getting it back, someone is stealing from you," said Dr. David Leak, medical director of Pain Control Consultants.

Leak said his company noticed accounting irregularities involving the Dublin company the past two years, adding Pain Control Consultants had received less money than owed for the past five or six months.

"I have asked five CPAs to look at their books, and they all walked away shaking their heads," Leak said.

Pain Control Consultants said it is owed for the months of September and October, when it deposited $860,000 but only received 22 percent compensation, compared with the 97 percent promised.

Leak said Pain Control Consultants has tried for months to buy out its contract with NCFE, without success.

Other providers also are complaining.

Michael Reese Hospital and Medical Center in Chicago has acknowledged that slow payments from NCFE have threatened its ability to meet payroll obligations.

NCFE's financing played an important role in 1998, when Doctors Community Healthcare of Arizona purchasing Michael Reese Hospital. Nearly $70 million in financing came from NCFE. The Arizona company also owns hospitals in Washington and Los Angeles that are NCFE clients.

Forbes has reported that NCFE has been the target of several lawsuits and allegations of fraud, including a federal suit in Baltimore that alleges NCFE was not advancing a nursing home enough money for it to maintain operations.

NCFE said it was the victim of changing financial conditions and a delayed annual audit.

The company has not been able to issue bonds since May and instead has dipped into the reserves of its biggest bond issue, called NPF XII. These reserves, not meant to be drawn on, were greatly depleted, causing credit-rating agencies to lower the company's rating.

Nickell said the audit for 2001 is being prepared by Deloitte & Touche and should be available soon.

Nickell attributed problems with Pain Control Consultants to a change in that company's status when it went under Medicare review.

"The dispute is disappointing because Dr. Leak was a long and valued customer," he said.

NCFE employs 327 at offices in Dublin; Durham, N.C.; Port Charlotte, Fla.; and Scottsdale, Ariz. The majority are in Muirfield Village, where the company had received approval last summer to improve and connect its four buildings.

The company was founded by Lance K. Poulsen, who remains chairman and chief executive; Donald H. Ayers and Rebecca S. Parrett. Ayers and Parrett, who came from OhioHealth, are retired but remain on the private company's board, Nickell said.

He said company officials weren't available for comment.

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